3M Company (NYSE:MMM) Citi 2023 Global Industrial Tech and Mobility Conference February 22, 2023 1:50 PM ET Company Participants Mike Roman - Chairman and CEO Monish Patolawala - EVP, CFO and Transformation Officer Conference Call Participants Andrew Kaplowitz - Citi Andrew Kaplowitz All right. Good afternoon, everyone, again. We'll let a few stragglers come in here, but we'll get started here. We're extremely excited to have 3M with us today. We've got Mike Roman, who is the Chairman and CEO; and Monish Pa ...

Workforce and Employment - 3M employed approximately 92,000 people as of December 31, 2022, with 37,000 in the United States and 55,000 internationally[35]. - 3M's total number of employees decreased from 95,000 in 2021 to 92,000 in 2022, reflecting the impact of acquisitions and divestitures[183]. - 3M's total compensation includes competitive market-based pay and comprehensive benefits for employees, supporting talent attraction and retention[39]. - The company emphasizes a culture of health and well-being through various employee assistance programs and comprehensive health care benefits[36]. - The company plans to invest $50 million from 2020 to 2025 to address racial opportunity gaps through workforce development initiatives[38]. - The company focuses on diversity, equity, and inclusion initiatives to enhance its workforce and innovation culture[38]. Financial Performance - For the year ended December 31, 2022, total company net sales were $34,229 million, a decrease of 3.2% compared to $35,355 million in 2021[132]. - The adjusted earnings per diluted share for 2022 was $10.10, reflecting a decrease of 6% from $10.73 in 2021[131]. - Operating income margin for 2022 was 19.1%, down from 20.8% in 2021, while diluted earnings per share increased to $10.18 from $10.12[110]. - 3M's total sales decreased by 3.2% in 2022, with organic sales growth of 1.0% compared to 7.3% in 2021[161]. - The effective tax rate for 2022 was 9.6%, a decrease of 8.2 percentage points from 2021, primarily due to a tax-efficient structure associated with the Food Safety business split-off[122]. - 3M incurred approximately $2.3 billion in pre-tax litigation costs in 2022, including $1.3 billion related to Combat Arms Earplugs litigation and $355 million for PFAS-related matters[106]. Business Segments and Operations - 3M's business segments include Safety and Industrial, Transportation and Electronics, Health Care, and Consumer, each focusing on specific market trends and opportunities[14]. - The Health Care segment reported operating income of $1,815 million in 2022, a decrease of 10.9% from $2,037 million in 2021[132]. - Operating income for the Safety and Industrial segment was $1,199 million in 2022, down 51.4% from $2,466 million in 2021[132]. - Transportation and Electronics segment sales fell by 3.9%, with organic sales growth of 1.2% impacted by semiconductor supply chain constraints[168][169]. - Health Care segment sales decreased by 2.0%, with organic sales down 0.9% due to COVID-related trends and inflationary pressures[174][178]. - Consumer sales decreased by 3.9% in 2022 compared to 2021, with organic sales growth in stationery and office and home care, while home improvement saw a decline[179]. Environmental and Regulatory Matters - The company is involved in remediation actions relating to environmental matters from past operations, with reserves for anticipated remediation costs recorded when they are probable and reasonably estimable[45]. - 3M faces liabilities related to certain fluorochemicals known as PFAS, which could adversely impact its results due to increasing regulations[62]. - The company has made necessary expenditures for compliance with applicable environmental laws and regulations, emphasizing environmental responsibility[44]. - Future costs of compliance with government regulations, including environmental regulations, may materially affect 3M's capital expenditures, earnings, or competitive position[46]. - 3M plans to exit all PFAS manufacturing by the end of 2025 and discontinue the use of PFAS across its product portfolio by the same date[65]. - The company has been voluntarily cooperating with various agencies in reviewing the environmental and health effects of certain PFAS produced by it[63]. Strategic Initiatives and Changes - 3M announced its intention to spin off the Health Care business as a separate public company in July 2022[14]. - The company completed the split-off of its Food Safety Division, resulting in a pre-tax gain of $2.7 billion[106]. - 3M plans to retain a 19.9% ownership position in the Health Care business after its planned spin-off[175]. - The company is undergoing a multi-year phased implementation of an ERP system to improve operational efficiency and productivity[81]. - 3M's operational execution and ability to integrate acquisitions and strategic alliances will significantly impact future results[78]. Market and Economic Conditions - Approximately 60 percent of 3M's revenues are derived from outside the United States, making the company susceptible to global economic and geopolitical risks[56]. - The global pandemic associated with COVID-19 has significantly increased economic and demand uncertainty, impacting 3M's operations and financial performance[59]. - 3M's operations are impacted by the global pandemic, affecting demand for products and causing supply chain disruptions[105]. - The company suspended operations of its subsidiaries in Russia in March 2022 and committed to a plan to exit related net assets through an intended sale of the subsidiaries[57]. Financial Management and Capital Allocation - Cash dividends declared and paid totaled $1.49 per share in 2022, compared to $1.48 per share in 2021[97]. - The company has authorized a repurchase program for up to $10 billion of its outstanding common stock, with no pre-established end date[98]. - 3M maintains a strong liquidity profile, with a commercial paper program allowing for a maximum of $5 billion outstanding, and no commercial paper was outstanding at the end of 2022[205]. - The company plans to continue returning cash to shareholders through dividends and share repurchases while investing in organic growth and capital expenditures[204]. - 3M expects to contribute approximately $100 million to $200 million to its global defined benefit pension and postretirement plans in 2023[141].

3M Company (NYSE:MMM) Q4 2022 Earnings Conference Call January 24, 2023 9:00 AM ET Company Participants Bruce Jermeland - Senior Vice President, Investor Relations Mike Roman - Chairman & Chief Executive Officer Monish Patolawala - Chief Financial & Transformation Officer Conference Call Participants Scott Davis - Melius Research Andrew Kaplowitz - Citi Andrew Obin - Bank of America Stephen Tusa - JPMorgan Securities Joe Ritchie - Goldman Sachs Julian Mitchell - Barclays Deane Dray - RBC Capital Markets Nig ...

2022 Fourth Quarter Earnings (unaudited) Mike Roman Monish Patolawala Bruce Jermeland Chairman of the Board & Executive Vice President, Senior Vice President, Chief Executive Officer Chief Financial & Investor Relations Transformation Officer Forward looking statement This presentation contains forward-looking information about 3M's financial results and estimates and business prospects that involve substantial risks and uncertainties. You can identify these statements by the use of words such as "anticipat ...

Financial Data and Key Metrics Changes - 3M reported third quarter total sales of $8.6 billion, down 3.6% year-on-year, impacted by a 5.1% headwind from foreign currency translation and a 0.5% headwind from the divestiture of Food Safety [12][13] - Organic sales increased by 2% year-on-year, with a notable decline in disposable respirator demand negatively impacting organic sales by approximately $130 million [13] - Adjusted operating income was $1.9 billion with operating margins of 21.5%, up 40 basis points year-on-year [13][16] - Adjusted EPS for the quarter was $2.69, compared to $2.58 last year [13] Business Line Data and Key Metrics Changes - **Safety and Industrial**: Sales of $2.9 billion, up 1.7% organically, with a decline in disposable respirator demand impacting results [20][21] - **Transportation and Electronics**: Sales of $2.2 billion, up 3% organically, driven by backlog recovery in Greater China, despite declines in consumer electronics [23][24] - **Healthcare**: Sales of $2.1 billion, organic growth of 1.7%, with elective medical procedure volumes at approximately 90% of pre-COVID levels [25][26] - **Consumer**: Sales of $1.4 billion, up 1.5% organically, with growth led by Consumer Health and Safety [27][28] Market Data and Key Metrics Changes - APAC led organic growth at 3%, with China up 8% due to backlog recovery post-COVID lockdowns [6] - The Americas saw a 2% increase, while EMEA growth was flat amid geopolitical unrest [6] - The U.S. market was flat compared to 6% growth in the previous year [6] Company Strategy and Development Direction - 3M is focused on long-term growth through investments in productivity and sustainability, including new solutions for automotive displays and electric vehicle battery management [8][9] - The company is actively managing its portfolio, having completed the divestiture of its Food Safety business, which generated approximately $1 billion [10] - 3M is preparing for a healthcare spin-off to create two focused public companies [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a softening global economic outlook but emphasized ongoing innovation and customer service [5][10] - The company updated its full-year guidance, lowering organic growth expectations to 1.5% to 2% and adjusted EPS to $10.10 to $10.35 [7][29] - Management noted persistent inflationary pressures and geopolitical uncertainties impacting operations [16][29] Other Important Information - Third quarter adjusted free cash flow was $1.4 billion, with a conversion rate of 88% [18] - Capital expenditures were $435 million for the quarter, with a full-year expectation of $1.75 billion to $1.85 billion [19] - Net debt at the end of Q3 stood at $12.1 billion, down 3% year-on-year [20] Q&A Session Summary Question: Can you provide insights on regional performance? - Management highlighted strong growth in automotive and electrical markets in the Americas, with declines in Personal Safety and consumer spending [38][39] Question: How is pricing being managed in the current environment? - Management stated that pricing has effectively offset inflation, and they are well-positioned as they approach year-end [41][42] Question: What are the expectations for inflation in 2023? - Management noted some moderation in inflation but emphasized that it remains broad-based, with logistics costs showing some signs of slowing [44][45] Question: How is the company preparing for potential recessionary impacts? - Management emphasized a focus on customer service, productivity, and efficiency to navigate economic cycles [58] Question: Can you elaborate on the Healthcare segment's performance? - Management indicated that elective procedures are recovering but are still below pre-COVID levels due to staffing shortages and consumer discretionary spending [70][72]

Financial Data and Key Metrics Changes - 3M reported total sales of $8.7 billion for Q2 2022, reflecting a 1% organic growth compared to the previous year [26] - Adjusted earnings per share (EPS) for Q2 was $2.48, with adjusted operating income at $1.8 billion and adjusted operating margins at 21% [26][28] - The company experienced a decline in disposable respirator sales by approximately $150 million year-on-year, and a sales decline of about $140 million due to COVID-related lockdowns in Greater China [27][28] Business Line Data and Key Metrics Changes - The Safety and Industrial business posted sales of $2.9 billion, up 0.7% organically, impacted by a decline in disposable respirator sales [34] - Transportation and Electronics reported sales of $2.3 billion, up 0.5% organically, hindered by semiconductor supply chain constraints [36] - The Healthcare business achieved sales of $2.2 billion with organic growth of 4.4%, driven by strong demand in medical solutions and oral care [38] Market Data and Key Metrics Changes - The Greater China region saw a year-on-year sales decline of approximately 8% due to COVID-related lockdowns, although recovery was noted in June [64] - Europe experienced declines primarily in Consumer and Safety and Industrial sectors, with geopolitical risks and inflation impacting performance [66] Company Strategy and Development Direction - 3M plans to spin off its healthcare business, creating two distinct public companies, which will allow each to focus on their respective markets and drive long-term growth [5][12] - The company emphasizes disciplined portfolio management and innovation to capitalize on megatrends in areas such as electronics, safety, and sustainability [7][14] - 3M aims to enhance its operational efficiency and customer engagement through advanced e-commerce strategies and a focus on talent retention [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges from inflation, supply chain disruptions, and geopolitical tensions, while expressing cautious optimism about recovery in certain markets [55][66] - The company updated its full-year earnings guidance to a range of $10.30 to $10.80, primarily due to foreign exchange impacts and macroeconomic uncertainties [43] Other Important Information - 3M is taking steps to resolve litigation related to Combat Arms earplugs through a Chapter 11 process initiated by its subsidiary, Aearo Technologies [6][22] - The company has committed $1 billion to fund a trust for claims related to Combat Arms, aiming to provide clarity and efficiency in the resolution process [22][49] Q&A Session Summary Question: Can you explain the process for ring-fencing the Combat Arms liability? - Management indicated that Aearo Technologies will take on the liability, with a $1 billion trust funded based on expert analysis [49][50] Question: How does the current economic cycle affect planning for the second half of the year? - Management noted that while most end markets remain strong, there are signs of softening in consumer electronics and geopolitical risks in Europe [54][66] Question: What is the impact of raw material costs on pricing? - Management reported that pricing actions have offset inflation, with a mid-single-digit increase in prices across various markets [59] Question: How will the Chapter 11 filing for Aearo affect overall litigation costs? - Management provided an updated estimate for litigation-related expenses, indicating a total of approximately $2.2 billion for the year [68] Question: What are the risks associated with the healthcare separation? - Management acknowledged that while there are process steps to follow, they believe the legal framework supports their position [71][72]

Financial Data and Key Metrics Changes - The company reported significant changes in financial metrics during the first quarter, with specific figures to be detailed in the full report [1] Business Line Data and Key Metrics Changes - Each business line experienced varying degrees of performance, with some lines showing growth while others faced challenges, further details will be provided in the complete financial analysis [1] Market Data and Key Metrics Changes - The company noted fluctuations in market performance, impacting overall revenue and profitability, with specific market segments highlighted in the detailed report [1] Company Strategy and Development Direction - The company outlined its strategic focus for the upcoming quarters, emphasizing innovation and market expansion as key drivers for growth, with competitive positioning discussed in the context of industry trends [1] Management Comments on Operating Environment and Future Outlook - Management provided insights into the current operating environment, addressing challenges and opportunities, and expressed a cautiously optimistic outlook for the future, with specific forecasts to be elaborated in the full earnings call [1] Other Important Information - Additional relevant information regarding operational adjustments and market conditions will be included in the comprehensive financial report [1] Q&A Session Summary Question: What are the expectations for revenue growth in the upcoming quarters? - Management indicated that they anticipate steady revenue growth, driven by strategic initiatives and market demand, with specific figures to be discussed in the detailed financial outlook [1] Question: How is the company addressing supply chain challenges? - The company is actively working on optimizing its supply chain processes to mitigate disruptions and ensure product availability, with ongoing assessments of supplier relationships [1]